Replacing Rank Order Sales Compensation Plan with Goal-Based Plan
Background
The company was a large pharma company with a primary care sales force carrying three mature products and one growth product.
Old Sales Compensation Plan
The old sales compensation plan was a rank order design based on market share and market share change. Sales representatives first received a ranking on each metric for each product. Metric rankings were then combined so that each sales representative had one ranking on each product. These product rankings were then combined in order to get a single combined ranking. Compensation was given in payout levels of 5% (top 5% getting same compensation, then next 5%, etc.), with the bottom 20% of the sales force receiving no payout. This plan received an overall rating on our SCOR³ES® diagnostic assessment for sales compensation plans of 1.8, or very poor.
New Sales Compensation Plan
The new sales compensation plan designed by The Marketing Advantage was a TRx goal gap plan with a territory-level contingency plan. We customized our innovative goal gap with retained base plan to the unique needs and challenges of this sales force such that goal calculation included adjustments for “market basket potential” and managed care conditions. Payout was made using an “S” shaped curve that started paying at 80% attainment and included a contingency plan to protect the sales force should something outside of their control occur in the marketplace. This new plan received an overall rating on our SCOR³ES® diagnostic assessment of 4.2, or very good.
Sales Results
Sales improved 13.1%. For the first time, sales representatives knew how they were performing because compensation did not depend on the performance of others, but only themselves. All sales representatives stayed engaged rather than those at the bottom quitting because they would earn no bonus.
